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Conflict Resolution and the Transformation of the
Social Contract
David B. Lipsky
Cornell University, [email protected]
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Conflict Resolution and the Transformation of the Social Contract
Abstract
[Excerpt] Here is my argument in a nutshell. Beginning more than thirty years ago, the social contract that
had governed relations between workers and employers in the United States for the period following World
War II began to unravel. Other scholars, most notably Tom Kochan, Harry Katz, and Bob McKersie, have
charted the transformation of American industrial relations that began in the 1970s and to a great extent
continues today (Kochan et al. 1986). Seeber and I have argued that the emerging social contract that had
been produced by the transformation of U.S. industrial relations has had particularly profound consequences
for the handling of workplace conflict. To a degree, the rise of alternative dispute resolution (ADR) has been
the most obvious manifestation of how workplace conflict is handled under the new social contract. But our
research has led us to believe that there is a much deeper, systemic shift that is occurring in the management of
workplace conflict. We have focused on a development that moves conflict resolution significantly beyond
ADR—we have emphasized the significance of the emergence of so-called integrated conflict management
systems (Lipsky et al. 2003, Lipsky and Seeber 2003).
Keywords
workplace conflict, social contract, alternative dispute resolution, ADR, industrial relations
Comments
Suggested Citation
Lipsky, D. B. (2007). Conflict resolution and the transformation of the social contract [Electronic version].
Proceedings of the Fifty-Ninth Annual Meeting of the Labor and Employment Relations Association, Presidential
address.
Required Publisher’s Statement
© Labor and Employment Relations Association. Reprinted with permission. All rights reserved.
This article is available at DigitalCommons@ILR: http://digitalcommons.ilr.cornell.edu/conference/25
Conflict Resolution and the
Transformation of the Social Contract
David B. Lipsky
Cornell University
Before turning to the substance of my talk, I first want to express sincerest thanks to
the members of the association for giving me the opportunity to serve as their
president for the past year. It has certainly been a privilege and pleasure, and I am
most grateful especially to the officers and members of the Executive Board for their
support and cooperation. This evening at our general membership meeting Eileen will
become our new president, and I am confident she will provide our association with
superb leadership. Already as president-elect, Eileen has given all of us a preview of
the vigorous leadership she will provide this organization, and I want to tell her how
much I have enjoyed collaborating with her during the past year. Last, but certainly
not least, I want to express my heartfelt gratitude to our executive director, Paula
Wells, who provides LERA with exemplary service virtually every day of every year.
I also want to note, with sadness and regret, the passing of Neil Chamberlain, who
died last November at the age of ninety-one. Neil served on the faculty at Yale and,
for many years, at Columbia, and he was one of the greatest of all industrial relations
scholars. He served as president of this association in 1967 and was one of our first
members to receive LERA's Lifetime Achievement Award. For scholars of my
generation, Neil was a giant—through the rigor and originality of his research he
inspired us to believe that a career devoted to industrial relations research could be a
noble undertaking. We shall miss him.
For the past ten years, since giving up the deanship at the School of Industrial and
Labor Relations (Cornell University), I have focused most of my energies on studying
workplace conflict and the emergence of new methods of managing and resolving it. I
would like to use this opportunity to recapitulate some themes that my co-authors and
I have framed in the research we have conducted on conflict resolution over the past
decade. This research has been conducted under the auspices of the Institute on
Conflict Resolution at Cornell. I have had the good fortune of being able to
collaborate with several first-rate co-authors, most especially my friend and colleague
Ron Seeber, and also Harry Katz, Rocco Scanza, Dick Fincher, Jon Brock, and Ariel
Avgar (see, for example, Lipsky and Seeber 1998, 2003, 2006; Seeber and Lipsky
2006; Lipsky et al. 2003; Lipsky and Katz 2006; Lipsky, Scanza, and Avgar 2006;
Brock and Lipsky 2003; Lipsky and Avgar 2004, 2006).
Here is my argument in a nutshell. Beginning more than thirty years ago, the social
contract that had governed relations between workers and employers in the United
States for the period following World War II began to unravel. Other scholars, most
notably Tom Kochan, Harry Katz, and Bob McKersie, have charted the
transformation of American industrial relations that began in the 1970s and to a great
extent continues today (Kochan et al. 1986). Seeber and I have argued that the
emerging social contract that had been produced by the transformation of U.S.
industrial relations has had particularly profound consequences for the handling of
workplace conflict. To a degree, the rise of alternative dispute resolution (ADR) has
been the most obvious manifestation of how workplace conflict is handled under the
new social contract. But our research has led us to believe that there is a much deeper,
systemic shift that is occurring in the management of workplace conflict. We have
focused on a development that moves conflict resolution significantly beyond ADR—
we have emphasized the significance of the emergence of so-called integrated conflict
management systems (Lipsky et al. 2003, Lipsky and Seeber 2003).
Social Contract Theory
The theory of the social contract has its origins in the work of seventeenth- and
eighteenth-century philosophers, most notably Thomas Hobbes, John Locke, and
Jean-Jacques Rousseau. The Protestant Reformation and the decline in the authority
of the Catholic Church had served to weaken the divine authority of the monarchic
form of government. Europe had been ravaged by the wars of the Reformation, and
some philosophers recognized that the authority of the king, and more generally civil
government, needed a new justification. "In their search, political theorists—and
especially the Protestants among them—turned to the old biblical concept of
a covenant or contract, such as the one between God and Abraham and the Israelites
of the Old Testament" (Encyclopedia Britannica n.d.; see also Hobbes 1651, Locke
1690, Rousseau 1762). In sum, a social contract is a compact between rulers and
their people that defines their respective rights and duties. It justifies political
authority on the basis of reason and self-interest rather than divine authority. In
classical theory, a social contract was in the first instance a means of preventing
conflicts from arising. Under a social contract, individuals exchange their unlimited
liberty for the safety and security provided by sovereign power. If conflicts arose,
they would be resolved by the sovereign.
The trail that connects the classical concept of the social contract with the
contemporary and popular use of the term is a long and winding one. Nowadays the
term that was first meant to justify the sovereign authority of government is often used
to support the special interests of various stakeholder groups. Nevertheless, Seeber
and I have argued that the concept of the social contract is useful in understanding the
balance of rights and obligations between employers and employees.
The Social Contract at the Workplace
The social contract that governs the workplace was initially a compact fashioned
out of the imperatives of industrialization. Industrialization strengthened the authority
of management to make decisions regarding the products to be produced, the prices
charged, the business location, the investments needed in new technologies, and the
deployment and supervision of the workforce. Almost all organizations had a
hierarchical authority structure featuring top-down management at the workplace.
Managers and supervisors had the authority to direct employees. In the absence of
trade unions, that authority could not be questioned unless management violated the
law.
Under the hierarchical authority structure that prevailed in U.S. enterprise through
the last half of the nineteenth century and the first part of the twentieth century,
conflict was considered dysfunctional. Managers never thought of conflict
strategically. If they considered it at all, it was usually a phenomenon they did their
best to avoid, suppress, or ignore. If, despite their best efforts, they were forced to deal
with conflicts with their employees, the remedy was to punish those responsible. There
was little tolerance for dissent at the workplace. In sum, the nineteenth-century version
of the workplace social contract served to justify the sovereign authority of owners and
managers.
But the historic rise of unionism in the 1930s resulted in the transformation of the
nineteenth-century workplace social contract. The dramatic surge of unionism in the
1930s was often accompanied by strikes and picketing and, occasionally, violence.
The passage of the Wagner Act in 1935 not only encouraged workers to join unions
and deterred violence; it also represented a symbolic ascendancy of the collective
rights over the individual rights of workers in American jurisprudence.
The New Deal social contract that emerged in the 1940s endured until the 1970s.
Under the New Deal social contract, managers gained a relatively free hand in
controlling production and the workforce, and employees gained access to good jobs
at good wages. By the end of World War II the United States was indisputably the
leading economy in the world. Both labor and management were eager to rationalize
and bring order to a chaotic workplace. Both sides were willing to develop processes
and procedures that would serve to regulate employment relationships. Under the New
Deal version of the social contract, at many work sites a broad, if fragile, consensus
developed that would last more than thirty years. Managers recognized the legitimacy
of unions, unions restricted their concerns to well-defined workplace issues, and
government served as the impartial arbiter, helping to ensure a level playing field.
Conceptually, the New Deal social contract promised significant, tangible benefits
to most individuals and institutions in American society in exchange for their
accepting certain responsibilities and obligations. The scope of the New Deal social
contract was very broad—broader than the social contract had ever been in the past—
but clearly it did not include everyone. Its most novel feature was probably its
inclusion of trade unions. But many women, most minorities, and almost all of the
disabled were excluded from the New Deal social contract.
For most workers, union and nonunion alike, the New Deal social contract
promised a comfortable middle-class standard of living—provided the worker was a
law-abiding, heterosexual, white male. After World War II middle-class Americans
were able to enjoy a level of material well being that was unparalleled in world
history. The quid-pro-quo for the middle-class lifestyle was a set of fairly rigid
obligations and responsibilities, not only on the job but off as well. Under the New
Deal social contract, unions enjoyed protections and privileges that had never
previously existed and, possibly, may never again be duplicated. Indeed, with
hindsight, the status of unions under the New Deal social contract could very well be
an aberration in U.S. history; whether that status can ever be restored remains
problematic.
The Unraveling of the New Deal Social Contract
By the 1970s the glue that had held the New Deal social contract together had come
unstuck. The forces bringing about the transformation of the social contract included
the increasing globalization of business, the growth of multinational corporations, and
the rapid pace of technological change. These factors, in turn, required corporations
operating in international markets to accelerate the pace of their decision making. No
longer did most managers have the luxury of tolerating any aspect of their business
that dampened their ability to respond to market pressures.
In the 1960s U.S. economic strength was still based on its ability to produce and
distribute manufactured products, but by the 1980s its strength was based on its ability
to produce and distribute information. The United States had become a knowledgebased economy. Also by the 1980s the "deindustrialization" of the United States was
in full swing. In most manufacturing industries, dozens of plants were closed, jobs
were permanently lost, and communities were abandoned. The industrial centers of
the northeast and the midwest were left in shambles (Bluestone and Harrison 1982).
As the twentieth century wound to a close, the combination of globalization,
heightened competition, technological change, and deregulation had served to
undermine the terms and conditions of the New Deal social contract.
The Emergence of a New Social Contract
As the new millennium approached, there were increasing calls for a new workplace
social contract (Penner et al. 2000). At a White House summit on jobs and the economy
in 1998, for example, the participants focused on creating new employer-employee
relationships. The conferees agreed that it had become "necessary to craft a new social
contract between employer and employee" incorporating the concept of employability
fostered through skills training and life-long learning. Representatives of seemingly
every political hue came to believe that the demise of the New Deal social contract
required a rebalancing of the rights and obligations of employers and employees. On
the left end of the political spectrum, for example, Jeremy Rifkin, in his book The End
of Work,predicted that technological change and "hyper capitalism"—that is, the spread
of capitalism to all parts of the globe, including Russia and China—would necessitate a
new social contract that incorporates a radical reordering of workplace relationships
(Rifkin 1995). On the right end of the political spectrum,BusinessWeek described how
certain elements of the business community were attempting to define a new position
regarding the social responsibility of corporations:
In isolated pockets of Corporate America, a middle path is slowly emerging, one that
reflects a new paradigm for business and society in a global market. It recognizes that
job security died with the 1980s—but concedes, too, that employers bear an obligation
to help workers through transitions, and it attempts to align the interests of investors,
managers, and employees, aiming to share both the risks and rewards of doing business.
("Writing a New Social Contract" 1996)
A number of commentators have pointed out that the demise of the New Deal
social contract did not lead to the emergence of a dominant system of employment
relations. The American labor market has always been characterized by segmentation
and balkanization, and globalization seems to have strengthened those centrifugal
tendencies. Harry Katz and Owen Darbishire, for example, documented the existence
of four patterns of work practices in the United States and other industrialized
countries: a low-wage employment sector, featuring a high level of managerial
discretion and informal procedures; a human resource management model,
characterized by above-average contingent pay, teams, and a low level of unionism; a
joint team-based sector, featuring high pay, a high level of unionism, and a high level
of employee involvement and joint employer-union decision making; and in the
United States a small but significant sector that had adopted a Japanese-oriented
system featuring standardized procedures, employment stabilization, and problemsolving teams (Katz and Darbishire 2000).
In the United States, outside of the large and significant low-wage sector, the
transformation of the social contract is associated with a significant reorganization of
the way work is performed in many U.S. companies. A hallmark of the reorganization
of the workplace is the decline in the importance of hierarchy and the rise of teambased work. Many U.S. employers have discovered that employee performance and
productivity can be enhanced if employees are empowered to assume more
responsibility for the manner in which they perform their work. In many workplaces,
management has removed layers of supervision and delegated substantial authority to
teams of employees to control the direction of their activities. In our research on
conflict management systems, we studied sixty major corporations in the United
States, and all of them purported to use a team-based system of production (Lipsky et
al. 2003).
Most large American corporations, many of them working cooperatively with their
unions, experimented with a variety of workplace innovations designed to foster
employee involvement in decision making. Teams, delayering, multiskilling,
multitasking, contingent pay, empowerment, and participation are all elements of a fullfledged high-performance work system. By no means have all U.S. employers
embraced all of these elements, but Paul Osterman's research shows that a majority of
large companies adopted one or more of them (Osterman 1994, 2000). The
reorganization of the workplace was a consequence of management's drive for
increased flexibility in employment relations. Flexibility would allow them to shed
outdated work rules and practices, motivate employees, and enhance employee
productivity.
The Implications for Workplace Dispute Resolution
Many people—even professionals in our field—are unaware of how widespread the
use of ADR is in the United States. Here is one definition of ADR: it involves the use
of arbitration, mediation, fact finding, facilitation, and other third-party processes to
resolve disputes that might otherwise be handled through litigation (Lipsky et al.
2003). The dramatic growth in the use of ADR in recent years clearly seems
associated with the unraveling of the New Deal social contract and the emergence of a
new workplace compact.
Under the New Deal social contract, arbitration, mediation, and other third-party
techniques were seldom used to resolve non-union employment disputes. But under
the new social contract at the workplace, the use of these techniques in employment
disputes has become commonplace. A variety of forces have resulted in a shift in
favor of private rather than governmental or collective methods of resolving
workplace disputes. Research suggests that there are two proximate causes: one might
be labeled "litigation avoidance" and the other "union substitution" (Seeber and
Lipsky 2006, Colvin 2003).
Litigation Avoidance
Beginning in the 1970s there was a widespread perception among managers and
corporate attorneys that employment litigation was becoming increasingly costly and
time consuming. The dockets of federal, state, and local courts became crowded with
a backlog of unresolved disputes after the passage of new workplace legislation in the
1960s and 1970s. Between 1970 and 1989, for example, employment discrimination
case filings increased by 2,166 percent (Ford 2000). The business community's
dissatisfaction with the legal system caused it to search for measures that would
alleviate the growing burden of employment litigation. For example, it began to lobby
for tort reforms that would place limitations on civil lawsuits. The movement for tort
reform, however, had only piecemeal success, which probably strengthened the
business community's resolve to use ADR (Lipsky et al 2003).
Facilitating the growth of ADR has been a series of seminal decisions by the
federal courts. Two Supreme Court decisions (Gilmer in 1991 and Circuit City
Stores in 2001) supported an employer's right to require arbitration even if it meant
that an employee was denied access to the public justice system. It is now clear that an
American employer may, with near total impunity, require an employee, as a
condition of hiring and continued employment, to use private arbitration as the means
of resolving public claims against the employer that involve a statutorily protected
right. Mandatory arbitration agreements have many critics, and one, Kathy Stone, has
called them the "yellow dog contract" of our era (Stone 1996). Of course, such
agreements have many defenders, particularly in the business community (see, for
example, Estreicher 2001).
Union Substitution
The ascendancy of ADR is to a large extent linked to the decline of the labor
movement in the United States. No informed observer can possibly claim that the
secular decline in the American labor movement has been accompanied by a
corresponding decline in workplace conflict. All the evidence suggests that quite the
contrary is the case. Thus, the decline in collective representation has left a vacuum in
the available means of resolving workplace disputes, which has been filled, at least in
part, by the use of ADR. Many employers we interviewed were astonished to discover
that a union-free workplace was seldom free of conflict (Lipsky et al. 2003).
In the interviews we conducted with employers, we found that a handful
acknowledged that they use ADR as a means of avoiding unionization.
Understandably, many unions view ADR with skepticism, especially mandatory nonunion arbitration. The union movement has joined with civil rights organizations, the
plaintiffs' bar, and other liberal interest groups (such as the American Civil Liberties
Union) in opposing mandatory non-union arbitration. On the other hand, some unions
have embraced ADR, including voluntary arbitration, because they believe ADR
systems can extend the authority and influence of a union into areas normally
considered management prerogatives (Lipsky et al. 2003, Robinson et al. 2005).
As a consequence of the use of ADR, there has been a significant shift in the
resolution of many types of disputes—not only employment disputes—from the court
system to private forums. Some observers have claimed that this shift represents
the de facto privatization of the American system of justice. One index of the
privatization of our system of justice is the declining trend in the use of trials in the
United States. For example, Samborn reports a significant drop in federal trials over
the last thirty years. In 1970, of the 1',280 civil and criminal cases filed in the federal
courts, 10 percent were resolved after either a jury or a bench trial; by contrast, in
2001, of the 313,615 cases filed, only 2.2 percent were resolved by either a jury or a
bench trial (Samborn 2002). Evidence suggests similar trends in state courts.
Although several factors account for the phenomenon of "the vanishing trial," most
experts point to ADR as a major reason for the decline (Stipanowich 2004).
The research we have conducted over the last decade strongly suggests that ADR is
firmly institutionalized in a majority of American corporations, especially for
employment disputes. We have asserted that the use of ADR in the United States
passed the so-called tipping point in the 1990s. ADR is now so firmly embedded in
our laws, in both federal and state court systems, and in the practices of our principal
employers that there is simply no going back to a bygone era. In our own research we
did not find a single corporation that had adopted the use of ADR and then abandoned
it. Quite the contrary: we discovered that ADR was a way station between reliance on
conventional methods of dispute resolution and the development of integrated conflict
management systems (Lipsky et al. 2003).
The companies we studied began their journey by attempting to manage litigation;
they then expanded their concern to the management of disputes, and ultimately they
reached the point of systematically managing conflict. We discovered that virtually
every major corporation in the United States now uses ADR to resolve employment
disputes, but I need to acknowledge that not more than 20 or 25 percent of the Fortune
1000 have adopted an authentic integrated conflict management system. Those
companies that have adopted an integrated conflict management system have moved
from a reactive to a proactive, strategic approach to the management of conflict. Top
management in these companies regards the management of conflict as akin to the
management of any other corporate function, such as sales, marketing, and finance. In
contemporary U.S. organizations the movement toward integrated conflict
management systems is definitely the cutting edge in workplace conflict resolution
(Lipsky et al. 2003).
Conclusions
An intriguing question, in my view, is whether the emerging social contract in the
United States will constitute a new and stable equilibrium, matching in endurance
the traditional and the New Deal versions of the social contract, or whether it
represents merely a transitional phase to other societal arrangements we can scarcely
imagine. We might consider the question in its broadest terms. Francis Fukuyama, in
his book The End of History and the Last Man,argued that Western-style democratic
capitalism was achieving global hegemony and would be the dominant politicoeconomic system indefinitely (Fukuyama 1992). Is the new social contract at the
workplace, as Fukuyama might argue, the end of history? If the past is any guide to
the future, it seems to me that the new social contract is not the end of history,
although it may be a significant stage in our evolution. John Dunlop famously
declared that a so-called industrial relations system consisted of three sets of actors:
a hierarchy of managers and their representatives, a hierarchy of workers and their
agents, and specialized government agencies dedicated to employment relations.
Dunlop believed that in an industrial relations system there would be a tendency for
the three principal actors to achieve an equilibrium. He doubted that an industrial
relations system dominated by one or two of the actors could be sustained over an
extended period of time. He endorsed the so-called convergence hypothesis, which
holds that over time all industrial relations systems dominated by one or two actors
tend to become three-party systems (Dunlop 1958). Under the new social contract in
the United States, managers have been in the ascendancy, and they have generally
been supported by government agencies. Personally, I share Dunlop's view that a
two-actor system is unlikely to be a stable one. A long-term view of our industrial
relations system suggests that ultimately there will emerge a separate and
independent voice for worker advocacy, albeit not necessarily in the form of
traditional unionism. If that occurs, it is likely to diminish the role of ADR and
conflict management systems in employment relations.
But a realistic view of the short term—the next ten or twenty years—suggests that
the forces and factors that have brought about the new social contract at the workplace
are unlikely to abate and, accordingly, there will continue to be a need for new
approaches to conflict resolution and conflict management.
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